The business world is full of Key Performance Indicators…
of which all serve a very good purpose for telling a story about a current element of the business. There is however one KPI that all business owners should prepare and pay attention to more than others. The “Trailing 12 Months”.
The “Trailing 12 Month” number refers to the last 12 months for a selected financial metric within the business. Here’s an example: The Trailing 12 Months” of total revenue. When constructed in a graph, each data point on the graph equals the total past twelve months of revenue (June to May). When viewed this way on a graph you can see the overall direction the revenue is trending as a leading indicator and it smooths out any seasonal fluctuation. It’s clean and simple. If the line is going up that’s good, if it’s going down that’s bad.
A dealer in Alberta was using this KPI in 2008 and was able to spot a softening in the business six months earlier than its competitors. This allowed them to get out in front of the used equipment market and put aggressive sales programs in place for its sales team and saved thousands of dollars in used value write downs.
This “Trailing 12 Months” KPI can also play a highly valued role in tracking Gross Margin and Cash Flow.
If you’d like to discuss how we can assist you and your business, get in touch with John Higgins, the author of this article, at jhiggins@scpg.ca